This story is from August 9, 2006

Companies get innovative to woo investors

Tinesh Bhasin / TNN / Aug 9, 2006, 23:27 IST

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Orbit has promised retail investors a warrant along with each share that is allotted.

Companies get innovative to woo investors

MUMBAI: Companies going for initial public offerings are adopting innovative ways to woo investors. For instance, the recently concluded offering from GMR offered retail investors a 5% discount on the issue price.
An upcoming IPO by Orbit Group, a real estate company, has pushed the boundaries a little further though. Orbit has promised retail investors a warrant along with each share that is allotted.
Warrants are instruments issued that makes the investor eligible for a share at a future date. In Orbit's case, the warrants it issues can be converted into equity shares 18 months after the listing, say sources close to the IPO.
The arrangement works like this — if share prices go below the listing price 18 months after the day shares were listed, shareholders can cash their warrants at a 30% discount to the prevailing market price. If the price appreciates, they can encash it at a 10% discount.

This is the first time in 13 years that a company is coming up with warrants in its IPO. Reliance Petroleum's public issue has a similar insulation for investors. The company offered an instrument that was termed as triple option convertible debenture.
Maruti too had an arrangement to protect investments during IPO. It offered an option of buying shares from the investors for a period of six months, if the value of shares went below the listing price.
Pujit Aggarwal, MD, Orbit group, confirmed his plans for a public issue. He, however, refused to divulge the details. "We are going for an IPO and would be filing for clearances to Sebi soon. But I cannot comment on anything specific,'' he said.

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